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“Just give me a minute,” says Heather Reisman, chief executive of Indigo Books & Music as she proofreads a press release about the latest initiative at Kobo.

“This is really important. It has to go out right away,” she says, poring over the latest announcement about the digital reading service Indigo controls.

Kobo has just made its first donation of e-readers and books to a high-needs school based on the number of minutes Kobo’s paying customers spent reading.

“It’s an unbelievable initiative,” she adds.

Reisman’s enthusiasm for a program promoting digital reading seems at odds with her other role as head of the country’s largest bookstore retailer.

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But with industry experts predicting digital books could represent 40 to 50 per cent of all book sales within five years, Reisman has seen the opportunity and pounced.

As part of Indigo’s survival plan, Reisman pioneered Kobo in Canada two years ago and is taking it around the world, competing with the multi-national giants such as Amazon.com, Apple and Google.

“Indigo is in the business of encouraging people to read,” Reisman explains, in a rare sit-down interview in her light and airy office in the King St. W. entertainment district. “We don’t care if people want to read digitally or physically.”

Indigo’s bookselling counterparts in the U.S. are already in deep trouble. Market leader Barnes & Noble Inc. is a takeover target.

Meanwhile, rival Borders Group Inc. is operating in bankruptcy protection, a third of its 642 stores shuttered.

Indigo has so far escaped the worst by having fewer direct competitors in the superstore category (it bought out rival Chapters in 2001) and by diversifying sooner.

Still, business is hurting. Indigo’s sales rose by 5 per cent last year, but profit fell by two-thirds to $11 million as Indigo invested more heavily in e-books and new merchandise.

Toys and gifts have taken over more space in its 97 largest stores. This fall, the stores will begin carrying home decor, some designed exclusively for it by a New York studio.

The strategy is not without risk. In decor, Indigo will find itself up against numerous and diverse rivals, including Target Corp., the giant U.S. cheap-chic discounter that will open its first 150 Canadian stores, starting in the spring of 2013.

And unlike unsold books, which can be returned to the publisher for a refund, the retailer bears the full cost of selling other kinds of merchandise, whether at full or discounted prices.

But Reisman is confident Indigo has identified the right niche.

“Our interest is in beautifully designed, affordable products that continue the journey people are already taking with us. So, you’re reading and we’re into reading lamps, writing materials and desk accessories. People come to us for cookbooks and table design. So we’re extending things for the table,” she says.

To boost Indigo’s expertise in non-book retailing, the company recently named Tedford Marlow, a board member and seasoned U.S. retailer formerly at Urban Outfitters, as president to oversee the shift.

But when it comes to the future of books, Indigo’s self-described “chief book lover” has made her biggest bet on digital reading.

Whether it’s on the dedicated Kobo e-reader, or any one of a dozen other devices that can support a Kobo app, from RIM’s Playbook to Apple’s iPad, Reisman is expanding their presence in her bookstores and online.

So far, the stores are selling the Kobo and Playbook, but could eventually add any one of the consumer electronic devices that support a Kobo app, including the multi-purpose iPad, Reisman said.

Reading books on mobile phones is still in its infancy, but she’s not ruling anything out.

Kobo is doing well. Sales jumped to $60.9 million for the year ended April 2, from just $800,000 a year earlier, when it launched.

But it accounts for just 6 per cent of Indigo’s total revenue so far.

And profit margins on e-books are so slim that the only way to compete is in the global market, where other players have a head start and greater brand recognition.

In the U.S., Amazon.com’s Kindle is the market leader with a 41 per cent share, followed by Barnes & Noble at 27 per cent. Kobo ranks third somewhere “in the double digits.”

Kobo has the largest digital library with 2.3 million titles and its technology is compatible with a variety of devices.

But Amazon.com was able to boost e-book sales by charging just 99 cents a copy until publishers successfully fought the deep discounting.

Many of the rules of digital publishing are in flux, says Noah Genner, president and chief executive officer of BookNet Canada, a non-profit agency that serves the traditional book industry.

Things like who owns the rights to publish and distribute a book within a specific territory have become “a lot greyer” since the advent of the digital book, Genner says.

Some e-book stores honour most territorial rights, making sure money for a sale in Canada is submitted to the publisher who owns those rights. But that could change, he says.

“If I’m Amazon.com, I’d rather buy the worldwide rights to a book and not worry about submitting to Random House India and Random House Canada,” Genner predicts.

Kobo currently negotiates the digital rights in each country where it sells, Reisman says.

“There’s no question there’s a revolution,” Brad Martin, president of Random House Canada, one of the country’s largest book publishers, said in a separate interview later. “This new format has created a massive new market. Not since the 1930s, when paperback was introduced, has there been a format revolution. It’s changing the way we do business.”

In the latest dramatic example, on Thursday, author J. K. Rowling announced her wildly popular Harry Potter books would finally be published in digital form, but only on her website, Pottermore, bypassing both traditional book publishers and retailers.

Random House Canada says it will have digitized 95 per cent of its “back list,” some 30,000 titles already in print, by the end of the year.

In some categories, such as science fiction, the digital format already represents 50 per cent of sales, the publisher said.

“This is not about the death of the book,” Martin says. He believes e-books could expand the market eventually because it’s so much easier to sample, download and read them anywhere, anytime.

Still, ask Reisman what the industry will look like in five years and she pauses for quite a while before answering.

“I believe full-on dedicated book stores will be a very, very small part of the landscape.”

There may be a few niche players and Indigo’s own chain of smaller stores, which operate under the names Coles and SmithBooks, are “declining a bit,” she acknowledges.

They represented just 14.6 per cent of Indigo’s sales last year.

A few close every year, but there are still customers who just want the convenience of going to a smaller store, she says.

For the moment, Reisman says bookstores will remain in business for as long as customers want them.

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